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Also, the tricky part is that in my Quant finance model, those Xi represents cashflow for each term, varies from 5k to 200k. My numerical experiment shows the portfolio(sum of those independent r.v's ) distribution follows a multi-peak pattern.I not sure they can be approximated by this c*Z. Regards Bing
I really appreciate your answer.Although I did not learn this Edgeworth expansion before, I guess the rough idea before your approximation is to replace Sn with the 'magnified compensated Poission process ' c*Z.My question is how do we know this single r.v is good approximation ,of course, we already know that the first 3 moments are matched, but we still have higher moments unmatched right?
